With increasing frequency, radio announcements, classified ads, and television promotions are mentioning used car donations as a giving alternative that can result in a handsome, income tax write-off while also providing a simple way for both individuals and businesses to dispose of unwanted vehicles.
Better Business Bureaus around the country have reported increasing interest in donating used cars to local charities and affiliates of national organizations.
Before you donate your vehicle, do some homework.
• Ask for a copy of the organization’s Internal Revenue Service determination letter that verifies the soliciting group is tax exempt as a charity under section 501(c)(3) of the Internal Revenue Code. Don’t assume that a charitable-sounding organization requesting donations is eligible to receive tax deductible gifts.
• Ask the organization for copies of its latest annual report and IRS Form 990 that specify how they spent their funds in the past fiscal year. Check to make sure that the charity is registered to solicit with your state government’s charity registration office. Also, contact your Better Business Bureau for information it may have on file.
• Find out what happens to the donated cars. Some charities may state that donated cars will be used to help carry out the group’s program service activities (such as providing transportation for needy families). However, if the charity is involved in major promotions for such contributions, chances are that the volume donated will result in most cars not being used but, instead, sold to raise funds for the organization.
• Cars can be sold directly by the charity or through an outside seller, such as an auctioneer or used car dealer. If an outside seller is involved, the charity might receive a flat fee (for example, $100 per vehicle), a percentage of the actual sales price, or a combination of both. In some cases, less than 20 percent of the actual sale may go to the charity. Ask the charity for a receipt that verifies a car donation was made. For cars that need to be towed-in, the charity may need to mail receipts and titles to the donor.
This is all the more reason to check out the charity before making the donation.
It is also up to the donor, not the charity, to place an accurate value on the car donation. If the donated value, as claimed, exceeds $500, the individual or business contributor will need to complete IRS Form 8283 as an attachment to his/her tax return. If the claimed value is over $5,000, the donor will need to obtain a qualified written appraisal of the car.
Donating your unused car can be a win-win for you and the charity but just a little homework in the beginning can save huge headaches in the end. For more information on tax deductions, visit www.irs.gov.
Reach Kelvin Collins, the president and CEO of the Better Business Bureau of Central Georgia and the CSRA Inc., at (800) 763-4222 or www.bbb.org.